Billionaires Mark Cuban and Bill Ackman criticized a plan from Rep. Ro Khanna (D-Calif.) that would let illiquid startup founders pledge their shares to the government in exchange for a loan to cover their tax bills, warning it could leave founders drowning in debt or hand the government ownership stakes in struggling startups.
Cuban Warns of Government-Owned Startups
Under Khanna’s plan, founders would get a long period to repay the loan in cash, and if they couldn’t, the government would take ownership of the shares instead.
Allow illiquid founders to pledge shares with a loan from the government to pay tax. The loan period is long but not infinite (e.g. 10 years). The loan is non-resource: at the end of the period, the loan is either paid back in cash, or the government assumes the shares.
— Ro Khanna (@RoKhanna) August 15, 2026
In response, Cuban, in a post on X, called the plan “insane,” questioning what the state gains from lending a founder money that gets handed straight back as a tax payment.
“You want the state to loan money to the founder, who will then immediately give it back to the state as a wealth tax? Meaning the state has not received any incremental receipts? What’s the point of that?” the entrepreneur said.
Ro, that’s insane.
— Mark Cuban (@mcuban) August 16, 2026
You want the state to loan money to the founder, who will then immediately give it back to the state as a wealth tax ?
Meaning the state has not received any incremental receipts? What’s the point of that ?
Unless of course you want the gov to own shares… https://t.co/wJGaCvVfhE
He warned that the government could end up owning equity and holding board seats in companies that fail to repay their loans.
“Ideology is not a strategy,” Cuban added.
Failed Founders Could Face Lifelong Wage Garnishment
Ackman said the forgiven debt would be taxed as ordinary income, leaving founders with a tax bill right when they have no company, no equity, and no money to pay it.
“So the penalty for a failed startup is insolvency, and the government garnishes your wages for life,” Ackman added.
Under @RoKhanna’s plan, if the company fails, the founder has debt forgiveness income (DFI) which is taxable at ordinary rates.
— Bill Ackman (@BillAckman) August 16, 2026
Where will the founder find the cash to pay the taxes on DFI after his company fails?
So the penalty for a failed startup is insolvency and the… https://t.co/IfYdixE7H2
Part of a Broader Wealth Tax Push
Cuban previously warned that Khanna’s proposed 5% wealth tax on California billionaires could drive founders out of the state, saying many become “cash poor, stock rich” after reaching billion-dollar valuations, making it hard to pay taxes without selling or borrowing against their shares.
That proposal is a November ballot measure for a one-time 5% tax on roughly 250 California billionaires, backed by Khanna, Sen. Bernie Sanders (I-Vt.), and the state’s Democratic Party.
Gov. Gavin Newsom opposed it in favor of a federal approach.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo Courtesy: Kathy Hutchins on Shutterstock.com
